Professional Documents
Culture Documents
SONZA acting alone possessed enough bargaining power to broadcast industry, exclusivity is not necessarily the same as
demand and receive such huge talent fees for his services. The control.
power to bargain talent fees way above the salary scales of Same; Same; Same; Same; Policy Instruction No. 40 is a mere
ordinary employees is a circumstance indicative, but not issuance which does not have the force and effect of law.—SONZA
conclusive, of an independent contractual relationship. argues that Policy Instruction No. 40 issued by then Minister of
Same; Same; Same; Same; The greater the supervision and Labor Blas Ople on 8 January 1979 finally settled the status of
control the hirer exercises, the more likely the worker is deemed an workers in the broadcast industry. Under this policy, the types of
employee; The less control the hirer exercises, the more likely the employees in the broadcast industry are the station and program
worker is considered an independent contractor; Applying the employees. Policy Instruction No. 40 is a mere executive issuance
control test, SONZA is not an employee but an independent which does not have the force and effect of law. There is no legal
contractor.—Applying the control test to the present case, we find presumption that Policy Instruction No. 40 determines SONZA’s
that SONZA is not an employee but an independent contractor. status. A mere executive issuance cannot exclude independent
The control test is the most important test our courts apply in contractors from the class of service providers to the broadcast
distinguishing an employee from an independent contractor. This industry. The classification of workers in the broadcast industry
test is based on the extent of control the hirer exercises over a into only two groups under Policy Instruction No. 40 is not
worker. The greater the supervision and control the hirer binding on this Court, especially when the classification has no
exercises, the more likely the worker is deemed an employee. The basis either in law or in fact.
converse holds true as well—the less control the hirer exercises, Same; Same; Same; Same; The right of labor to security of
the more likely the worker is considered an independent tenure as guaranteed in the Constitution arises only if there is an
contractor. employer-employee relationship under labor laws; Not every
Same; Same; Same; Same; ABS-CBN did not exercise control performance of services for a fee creates an employer-employee
over the means and methods of performance of SONZA’s work.— relationship.—The right of labor to security of tenure as
We find that ABS-CBN was not involved in the actual guaranteed in the Constitution arises only if there is an employer-
performance that produced the finished product of SONZA’s work. employee relationship under labor laws. Not every performance of
ABS-CBN did not instruct SONZA how to perform his job. ABS- services for a fee creates an employer-employee relationship. To
CBN merely reserved the right to modify the program format and hold that every person who renders services to another for a fee is
airtime schedule “for more effective programming.” ABS-CBN’s an employee—to give meaning to the security of tenure clause—
sole concern was the quality of the shows and their standing in will lead to absurd results.
the ratings. Clearly, ABS-CBN did not exercise control over the
Same; Same; Labor Arbiter; The Labor Arbiter can decide a
means and methods of performance of SONZA’s work.
case based solely on the position papers and the supporting
Same; Same; Same; Same; A radio broadcast specialist who documents without a formal trial; The holding of a formal hearing
works under minimal supervision is an independent contractor.— or trial is something that the parties cannot demand as a matter of
A radio broadcast specialist who works under minimal right; Subject to the requirements of due process, the technicalities
supervision is an independent contractor. SONZA’s work as of law and the rules obtaining in the courts of law do not strictly
television and radio program host required special skills and apply in proceedings before a Labor Arbiter.—The Labor Arbiter
talent, which SONZA admittedly possesses. The records do not can decide a case based solely on the position papers and the
show that ABS-CBN exercised any supervision and control over supporting documents without a formal trial. The holding of a
how SONZA utilized his skills and talent in his shows. formal hearing or trial is something that the parties cannot
demand as a matter of right. If the Labor Arbiter is confident that
586 he can rely on the documents before him, he cannot be faulted for
not conducting a formal trial, unless under the particular
circumstances of the case, the documents alone are insufficient.
586 SUPREME COURT REPORTS ANNOTATED
The proceedings before a Labor Arbiter are non-litigious in
Sonza vs. ABS-CBN Broadcasting Corporation nature. Subject to the requirements of due process, the techni-
587
Same; Same; Same; Same; In the broadcast industry,
exclusivity is not necessarily the same as control.—Being an
exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can VOL. 431, JUNE 10, 2004 587
validly provide his services exclusively to the hiring party. In the
Sonza vs. ABS-CBN Broadcasting Corporation
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592
VOL. 431, JUNE 10, 2004 591
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Sonza vs. ABS-CBN Broadcasting Corporation
filed a motion for reconsideration, which the NLRC denied
in its Resolution dated 3 July 1998.
It may not be amiss to state that jurisdiction over the instant
On 6 October 1998, SONZA filed a special civil action for
controversy indeed belongs to the regular courts, the same being
certiorari before the Court of Appeals assailing the decision
in the nature of an action for alleged breach of contractual
and resolution of the NLRC. On 26 March 1999, the Court
8
obligation on the part of respondent-appellee. As squarely
of Appeals rendered a Decision dismissing the case.
apparent from complainant-appellant’s Position Paper, his claims
Hence, this petition.
for compensation for services, ‘13th month pay’, signing bonus and
travel allowance against respondent-appellee are not based on the
The Rulings of the NLRC and Court of Appeals Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase
The Court of Appeals affirmed the NLRC’s finding that no Agreement are based on the latter. A portion of the Position Paper
employer-employee relationship existed between SONZA of complainant-appellant bears perusal:
and ABS-CBN. Adopting the NLRC’s decision, the
appellate court quoted the following findings of the NLRC: ‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting
x x x the May 1994 Agreement will readily reveal that MJMDC of shares of stocks…with FIVE HUNDRED THOUSAND PESOS
entered into the contract merely as an agent of complainant (P500,000.00).
Sonza, the principal. By all indication and as the law puts it, the Similarly, complainant is also entitled to be paid 13th month pay
act of the agent is the act of the principal itself. This fact is made based on an amount not lower than the amount he was receiving prior to
particularly true in this case, as admittedly MJMDC ‘is a effectivity of (the) Agreement’.
management company devoted exclusively to managing the Under paragraph 9 of (the May 1994 Agreement), complainant is
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. entitled to a commutable travel benefit amounting to at least One
Tiangco.’ (Opposition to Motion to Dismiss) Hundred Fifty Thousand Pesos (P150,000.00) per year.’
Clearly, the relations of principal and agent only accrues
between complainant Sonza and MJMDC, and not between ABS- Thus, it is precisely because of complainant-appellant’s own
CBN and MJMDC. This is clear from the provisions of the May recognition of the fact that his contractual relations with ABS-
1994 Agreement which specifically referred to MJMDC as the CBN are founded on the New Civil Code, rather than the Labor
‘AGENT.’ As a matter of fact, when complainant herein Code, that instead of merely resigning from ABS-CBN,
unilaterally rescinded said May 1994 Agreement, it was MJMDC complainant-appellant served upon the latter a ‘notice of
which issued the notice of rescission in behalf of Mr. Sonza, who rescission’ of Agreement with the station, per his letter dated
himself signed the same in his capacity as President. April 1, 1996, which asserted that instead of referring to unpaid
Moreover, previous contracts between Mr. Sonza and ABS- employee benefits, ‘he is waiving and renouncing recovery of the
CBN reveal the fact that historically, the parties to the said remaining amount stipulated in paragraph 7 of the Agreement
agreements are ABS-CBN and Mr. Sonza. And it is only in the but reserves the right to such recovery of the other benefits under
May 1994 Agreement, which is the latest Agreement executed said Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion
between ABS-CBN and Mr. Sonza, that MJMDC figured in the to Dismiss dated July 10, 1996).
said Agreement as the agent of Mr. Sonza. Evidently, it is precisely by reason of the alleged violation of
We find it erroneous to assert that MJMDC is a mere ‘labor- the May 1994 Agreement and/or the Stock Purchase Agreement
only’ contractor of ABS-CBN such that there exist[s] employer- by respondent-appellee that complainant-appellant filed his
employee relationship between the latter and Mr. Sonza. On the complaint. Complainant-appellant’s claims being anchored on the
contrary, We find it indubitable, that MJMDC is an agent, not of alleged breach of contract on the part of respondent-appellee, the
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly same can be resolved by reference to civil law and not to labor
admitted by the latter and MJMDC in the May 1994 Agreement. law. Consequently, they are within the realm of civil law and,
thus, lie with the regular courts. As held in the case of Dai-Chi
Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 radio and television program host is an employee of the
November 1994, an action 9for breach of contractual obligation is broadcast station.
intrinsically a civil dispute. (Emphasis supplied) The instant case involves big names in the broadcast
industry, namely Jose “Jay” Sonza, a known television and
_______________ radio personality,
15 Fleischer Company, Inc. v. National Labor Relations Commission, ABS-CBN directly paid SONZA his monthly talent fees
G.R. No. 121608, 26 March 2001, 355 SCRA 105; AFP Mutual Benefit with no part of his fees going to MJMDC. SONZA asserts
Association, Inc. v. National Labor Relations Commission, G.R. No. that this mode of fee payment shows that he was an
102199, 28 January 1997, 267 SCRA 47; Cathedral School of Technology v. employee of ABS-CBN. SONZA also points out that ABS-
National Labor Relations Commission, G.R. No. 101438, 13 October 1992, CBN granted him benefits and privileges
214 SCRA 551. See also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil.
747; 365 SCRA 418 (2001); Gonzales v. National Labor Relations _______________
Commission, G.R. No. 131653, 26 March 2001, 355 SCRA 195; Sandigan
18 De Los Santos v. National Labor Relations Commission, 423 Phil.
Savings and Loan Bank, Inc. v. National Labor Relations Commission,
1020; 372 SCRA 723 (2001); Traders Royal Bank v. National Labor
324 Phil. 348; 254 SCRA 126 (1996); Magnolia Dairy Products
Relations Commission, 378 Phil. 1081; 321 SCRA 467 (1999); Aboitiz
Corporation v. National Labor Relations Commission, 322 Phil. 508; 252
Shipping Employees Association v. National Labor Relations Commission,
SCRA 483 (1996).
G.R. No. 78711, 27 June 1990, 186 SCRA 825; Ruga v. National Labor
16 Madlos v. National Labor Relations Commission, 324 Phil. 498; 254
Relations Commission, G.R. Nos. 72654-61, 22 January 1990, 181 SCRA
SCRA 248 (1996).
266.
17 Domasig v. National Labor Relations Commission, G.R. No. 118101,
19 Ibid.
16 September 1996, 261 SCRA 779.
596
595
18
“which he would not have enjoyed if he were truly the
by which the work is accomplished. The last element, the
19
subject of a valid job contract.”
socalled “control test,” is the most important element.
All the talent fees and benefits paid to SONZA were the
A. Selection and Engagement of Employee result of negotiations that led to the Agreement. If SONZA
were ABS-CBN’s employee, there would be no need for the
ABS-CBN engaged SONZA’s services to co-host its
parties to stipulate on benefits such as “SSS, Medicare, x x
television and radio programs because of SONZA’s peculiar 20
x and 13th month pay” which the law automatically
skills, talent and celebrity status. SONZA contends that 21
incorporates into every employer-employee contract.
the “discretion used by respondent in specifically selecting
Whatever benefits SONZA enjoyed arose from contract and
and hiring complainant over other broadcasters of possibly 22
not because of an employer-employee relationship.
similar experience and qualification as complainant belies
SONZA’s talent fees, amounting to P317,000 monthly in
respondent’s claim of independent contractorship.”
the second and third year, are so huge and out of the
Independent contractors often present themselves to
ordinary that they indicate more an independent
possess unique skills, expertise or talent to distinguish
contractual relationship rather than an employer-employee
them from ordinary employees. The specific selection and
relationship. ABS-CBN agreed to pay SONZA such huge
hiring of SONZA, because of his unique skills, talent and
talent fees precisely because of SONZA’s unique skills,
celebrity status not possessed by ordinary employees, is a
talent and celebrity status not possessed by ordinary
circumstance indicative, but not conclusive, of an
employees. Obviously, SONZA acting alone possessed
independent contractual relationship. If SONZA did not
enough bargaining power to demand and receive such huge
possess such unique skills, talent and celebrity status,
talent fees for his services. The power to bargain talent fees
ABS-CBN would not have entered into the Agreement with
way above the salary scales of ordinary employees is a
SONZA but would have hired him through its personnel
circumstance indicative, but not conclusive, of an
department just like any other employee.
independent contractual relationship.
In any event, the method of selecting and engaging
The payment of talent fees directly to SONZA and not to
SONZA does not conclusively determine his status. We
MJMDC does not negate the status of SONZA as an
must consider all the circumstances of the relationship,
independent contractor. The parties expressly agreed on
with the control test being the most important element.
such mode of payment.
B. Payment of Wages
_______________
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of this Agreement.” Jay Sonza shall faithfully and completely perform each condition of this
21 Presidential Decree No. 851 (Requiring All Employers to Pay their Agreement for and in consideration of the aforesaid services by the
Employees a 13th-month Pay) for the 13th month pay; Republic Act No. AGENT and its talent, the COMPANY agrees to pay the AGENT for the
1161 (Social Security Law) for the SSS benefits; and Republic Act No. first year of this Agreement the amount of THREE HUNDRED TEN
7875 (National Health Insurance Act of 1995) for the Philhealth THOUSAND PESOS ONLY (P310,000.00) per month, payable on the 10th
insurance. and 25th of each month. For the second and third year of this Agreement,
22 Article 1157 of the Civil Code explicitly provides: the COMPANY shall pay the amount of THREE HUNDRED
SEVENTEEN THOUSAND PESOS ONLY (P317,000.00) per month,
Obligations arise from: payable likewise on the 10th and 25th of the each month.”
(1) Law; 25 Paragraph 11 of the Agreement states: “In the event of cancellation
(2) Contracts; of this Agreement through no fault of the AGENT and its talent,
(3) Quasi-contracts; COMPANY agrees to pay the full amount specified in this Agreement for
(4) Acts or omissions punished by law; and the remaining period covered by this Agreement, provided that the talent
(5) Quasi-delicts. (Emphasis supplied) shall not render any service for or in any other radio or television produc
597 598
VOL. 431, JUNE 10, 2004 597 598 SUPREME COURT REPORTS ANNOTATED
Sonza vs. ABS-CBN Broadcasting Corporation Sonza vs. ABS-CBN Broadcasting Corporation
Under the Agreement, MJMDC is the AGENT of SONZA, SONZA assails the Labor Arbiter’s interpretation of his
to whom MJMDC would have to turn over any talent fee rescission of the Agreement as an admission that he is not
accruing under the Agreement. an employee of ABS-CBN. The Labor Arbiter stated that “if
it were true that complainant was really an employee, he
C. Power of Dismissal would merely resign, instead.” SONZA did actually resign
For violation of any provision of the Agreement, either from ABS-CBN but he also, as president of MJMDC,
party may terminate their relationship. SONZA failed to rescinded
26
the Agreement. SONZA’s letter clearly bears this
show that ABS-CBN could terminate his services on out. However, the manner by which SONZA terminated
grounds other than breach of contract, such as his relationship with ABS-CBN is immaterial. Whether
retrenchment to prevent losses as provided under labor SONZA rescinded the Agreement or resigned from work
23
laws. does not determine his status as employee or independent
During the life of the Agreement, ABS-CBN agreed to contractor.
pay SONZA’s talent fees as long as “AGENT and Jay Sonza
shall faithfully and completely perform each condition of D. Power of Control
24
this Agreement.” Even if it suffered severe business Since there is no local precedent on whether a radio and
losses, ABS-CBN could not retrench SONZA because ABS- television program host is an employee or an independent
CBN remained obligated to pay SONZA’s talent fees during contractor, we refer to foreign case law in analyzing the
the life of the Agreement. This circumstance indicates an present case. The United States Court of Appeals, First
independent contractual relationship between SONZA and Circuit, recently held in Alberty-Vélez v. Corporación De
27
ABS-CBN. Puerto Rico Para La Difusión Pública (“WIPR”) that a
SONZA admits that even after ABS-CBN ceased television program host is an independent contractor. We
broadcasting his programs, ABS-CBN still paid him his quote the following findings of the U.S. court:
talent fees. Plainly, ABS-CBN adhered to its undertaking
in the Agreement to continue paying SONZA’s talent fees Several factors favor classifying Alberty as an independent
during the remaining life of the Agreement even if ABS- contractor. First, a television actress is a skilled position requiring
CBN cancelled SONZA’s programs through no fault of talent and training not available on-the-job. x x x In this regard,
25
SONZA. Alberty possesses a master’s degree in public communications and
journalism; is trained in dance, singing, and modeling; taught
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with the drama department at the University of Puerto Rico; and 29 In the United States, aside from the right of control test, there are
acted in several theater and television productions prior to her the “economic reality” test and the “multi-factor test.” The tests are drawn
affiliation with “Desde Mi Pueblo.” Second, Alberty provided the from statutes, regulations, rules, policies, rulings, case law and the like.
“tools and instrumentalities” necessary for her to perform. The “right of control” test applies under the Federal Internal Revenue
Specifically, she provided, or obtained sponsors to provide, the Code (“IRC”). The “economic reality” test applies to the Federal Fair Labor
costumes, jewelry, and other image-related supplies and services Standards Act (“FLSA”).29 The California Division of Labor Standards
necessary for her appearance. Alberty disputes that this factor Enforcement (“DLSE”) uses a hybrid of these two tests often referred to as
favors independent contractor status because WIPR provided the the “multi-factor test” in determining who an employee is.
“equipment necessary to tape the show.” Alberty’s argument is Most courts in the United States have utilized the control test to
misplaced. The equipment necessary for Alberty to conduct her determine whether one is an employee. Under this test, a court must
job as host of “Desde Mi Pueblo” related to her appearance on the consider the hiring party’s right to control the manner and means by
show. Others provided equipment for filming and pro- which the product is accomplished. Among other factors relevant to this
inquiry are the skills required; the source of the instrumentalities and
_______________ tools; the location of the work; the duration of the relationship between
the parties; whether the hiring party has the right to assign additional
tion of any person, firm, corporation or any entity competing with the
projects to the hired party; the extent of the hired party’s discretion over
COMPANY until the expiry hereof.”
when and how long to work; the method of payment; the hired party’s role
26 The opening sentence of the second paragraph of SONZA’s letter reads:
in hiring and paying assistants; whether the work is part of the regular
“As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
business of the hiring party; whether the hiring party is in business; the
concerning his programs and career. x x x”
provision of employee benefits; and the tax treatment of the hired party.
27 361 F.3d 1, 2 March 2004.
(www.piercegorman.com., quoted from the article entitled “Management-
side employment law advice for the entertainment industry” with subtitle
599
“Classification of Workers: Independent Contractors versus Employee” by
David Albert Pierce, Esq.)
VOL. 431, JUNE 10, 2004 599
600
Sonza vs. ABS-CBN Broadcasting Corporation
ducing the show, but these were not the primary tools that 600 SUPREME COURT REPORTS ANNOTATED
Alberty used to perform her particular function. If we accepted
Sonza vs. ABS-CBN Broadcasting Corporation
this argument, independent contractors could never work on
collaborative projects because other individuals often provide the
equipment required for different aspects of the collaboration. x x x true as well—the less control the hirer exercises, the more 30
Third, WIPR could not assign Alberty work in addition to likely the worker is considered an independent contractor.
filming “Desde Mi Pueblo.” Alberty’s contracts with WIPR First, SONZA contends that ABS-CBN exercised control
specifically provided that WIPR hired her “professional services over the means and methods of his work.
as Hostess for the Program Desde Mi Pueblo.” There is no SONZA’s argument is misplaced. ABS-CBN engaged
evidence that WIPR assigned28 Alberty tasks in addition to work SONZA’s services specifically to co-host the “Mel & Jay”
related to these tapings. x x x (Emphasis supplied) programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his
Applying the control test to the present case, we find that skills and talent. How SONZA delivered his lines, appeared
SONZA is not an employee but an independent contractor. on television, and sounded on radio were outside ABS-
The control test is the most important test our courts apply CBN’s control. SONZA did not have to render eight hours
in distinguishing an employee from an independent of work per day. The Agreement required SONZA to attend
29
contractor. This test is based on the extent of control the only rehearsals and tapings of the shows,
31
as well as pre-
hirer exercises over a worker. The greater the supervision and post-production staff meetings. ABS-CBN could not
and control the hirer exercises, the more likely the worker dictate the contents of SONZA’s script. However, the
is deemed an employee. The converse holds Agreement prohibited SONZA 32
from criticizing in his shows
ABS-CBN or its interests. The clear implication is that
_______________ SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
28 See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980). We find that ABS-CBN was not involved in the actual
performance that produced the finished product of
33
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33
SONZA’s work. ABS-CBN did not instruct SONZA how to SONZA’s work. ABS-CBN could not terminate or discipline
perform his job. ABS-CBN merely reserved the right to SONZA even if the means and methods of performance of
modify the program format and air- his work—how he delivered his lines and appeared on
television—did not meet ABS-CBN’s approval. This proves
_______________ that ABS-CBN’s control was limited only to the result of
SONZA’s work, whether to broadcast the final product or
30 www.piercegorman.com., quoted from the article entitled not. In either case, ABS-CBN must still pay SONZA’s
“Management-side employment law advice for the entertainment talent fees in full until the expiry of the36Agreement.
industry” with subtitle “Classification of Workers: Independent In Vaughan, et al. v. Warner, et al., the United States
Contractors versus Employee” by David Albert Pierce, Esq. Circuit Court of Appeals ruled that vaudeville performers
31 Paragraph 4 of the Agreement provides: “AGENT will make available were independent contractors although the management
Jay Sonza for rehearsals and tapings of the Programs on the day and time reserved the right to delete objectionable features in their
set by the producer and director of the Programs and to attend pre and shows. Since the management did not have control over the
post production staff meetings.” manner of performance of the skills of the artists, it could
32 Paragraph 15 of the Agreement provides: “AGENT, talent shall not only control
37
the result of the work by deleting objectionable
use the Programs as a venue to broadcast or announce any criticism on features.
any operational, administrative, or legal problems, situations or other
matter which may occur, exist or alleged to have occurred or existed
_______________
within the COMPANY. Likewise, AGENT, talent shall, in accordance with
good broadcast management and ethics, take up with the proper officers of 34 Paragraph 3 of the Agreement provides: “The COMPANY reserves
the COMPANY suggestions or criticisms on any matter or condition the right to modify the program format and likewise change airtime
affecting the COMPANY or its relation to the public or third parties.” schedule for more effective programming.”
33 In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. 35 The right not to broadcast an independent contractor’s show also
Summers, 232 F.3d 933 (D.C. Cir.), plaintiff’s superior was not involved in gives the radio and television station protection in case it deems the
the actual performance that produced the final product. contents of the show libelous.
36 157 F.2d 26, 8 August 1946.
601 37 Ibid.
602
VOL. 431, JUNE 10, 2004 601
Sonza vs. ABS-CBN Broadcasting Corporation
602 SUPREME COURT REPORTS ANNOTATED
604
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Sonza vs. ABS-CBN Broadcasting Corporation
CBN exercised any supervision and control over how
SONZA utilized his skills and talent in his shows. Further, not every form of control that a party reserves to himself
Second, SONZA urges us to rule that he was ABS-CBN’s over the conduct of the other party in relation to the services
employee because ABS-CBN subjected him to its rules and being rendered may be accorded the effect of establishing an
standards of performance. SONZA claims that this employer-employee relationship. The facts of this case fall
indicates ABS-CBN’s control “not only [over] his manner of squarely with the case of Insular Life Assurance Co., Ltd. vs.
work but also the quality of his work.” NLRC. In said case, we held that:
The Agreement stipulates that SONZA shall abide with 41
the rules and standards of performance “covering talents” Logically, the line should be drawn between rules that merely serve as
of ABS-CBN. The Agreement does not require SONZA to guidelines towards the achievement of the mutually desired result
comply with the rules and standards of performance without dictating the means or methods to be employed in attaining it,
prescribed for employees of ABS-CBN. The code of conduct and those that control or fix the methodology and bind or restrict the
imposed on SONZA under the Agreement refers to the party hired to the use of such means. The first, which aim only to
“Television and Radio Code of the Kapisanan ng mga promote the result, create no employer-employee relationship unlike the
44
The Vaughan case also held that one could still be an ostensibly under the employ of the “labor-only” contractor;
independent contractor although the hirer reserved certain and (3) the principal who is deemed the real employer.
supervision to insure the attainment of the desired result. Under this scheme, the “labor-only” contractor is the agent
The hirer, however, must not deprive the one hired 45from of the principal. The law makes the principal responsible to
performing his services according to his own initiative. the employees of the “labor-only contractor” as if the 48
Lastly, SONZA insists that the “exclusivity clause” in principal itself directly hired or employed the employees.
the Agreement is the most extreme form of control which These circumstances are not present in this case.
ABS-CBN exercised over him. There are essentially only two parties involved under
This argument is futile. Being an exclusive talent does the Agreement, namely, SONZA and ABS-CBN. MJMDC
not by itself mean that SONZA is an employee of ABS- merely acted as SONZA’s agent. The Agreement expressly
CBN. Even an independent contractor can validly provide states that MJMDC acted as the “AGENT” of SONZA. The
his services exclusively to the hiring party. In the records do not show that MJMDC acted as ABS-CBN’s
broadcast industry, exclusivity is not necessarily the same agent. MJMDC, which stands for Mel and Jay
as control. Management and Development Corporation, is a
The hiring of exclusive talents is a widespread 46
and corporation organized and owned by SONZA and
accepted practice in the entertainment industry. This TIANGCO. The President and General Manager of
practice is not designed to control the means and methods MJMDC is SONZA himself. It is absurd to hold that
of work of the talent, but simply to protect the investment MJMDC, which is owned, controlled, headed and managed
of the broadcast station. The broadcast station normally by SONZA, acted as agent of ABS-CBN in entering into the
spends substantial amounts of money, time and effort “in Agreement with SONZA, who himself is represented by
building up its talents as well as the programs they appear MJMDC. That would make MJMDC the agent of both ABS-
in and thus expects that said talents remain exclusive
47
with CBN and SONZA.
the station for a commensurate period of time.” Normally,
a much higher fee is paid to talents who agree to work _______________
exclusively for
48 The second paragraph of Article 106 of the Labor Code reads:
605 the workers in the same manner and extent as if the latter were directly employed
by him.
SONZA argues that Policy Instruction No. 40 issued by papers/memorandum, the Labor Arbiter shall motu propio
then Minister of Labor Blas Ople on 8 January 1979 finally determine whether there is need for a formal trial or hearing. At
settled the status of workers in the broadcast industry. this stage, he may, at his discretion and for the purpose of making
Under this policy, the types of employees in the broadcast such determination, ask clarificatory questions to further elicit
industry are the station and program employees. facts or information, including but not limited to the subpoena of50
Policy Instruction No. 40 is a mere executive issuance relevant documentary evidence, if any from any party or witness.
which does not have the force and effect of law. There is no
legal presumption that Policy Instruction No. 40 The Labor Arbiter can decide a case based solely on the
determines SONZA’s status. A mere executive issuance position papers
51
and the supporting documents without a
cannot exclude independent contractors from the class of formal trial. The holding of a formal hearing or trial is
service providers to the broadcast industry. The something
52
that the parties cannot demand as a matter of
classification of workers in the broadcast industry into only right. If the Labor Arbiter is confident that he can rely on
two groups under Policy Instruction No. 40 is not binding the documents before him, he cannot be faulted for not
on this Court, especially when the classification has no conducting a formal trial, unless under the particular
basis either in law or in fact. circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are
Affidavits of ABS-CBN’s Witnesses non-litigious in nature. Subject to the requirements of due
process, the technicalities of law and the rules obtaining in
SONZA also faults the Labor Arbiter for admitting the
the courts of law do not strictly apply in proceedings before
affidavits of Socorro Vidanes and Rolando Cruz without
a Labor Arbiter.
giving his counsel the opportunity to cross-examine these
witnesses. SONZA brands these witnesses as incompetent Talents as Independent Contractors
to attest on the prevailing practice in the radio and
television industry. SONZA views the affidavits of these ABS-CBN claims that there exists a prevailing practice in
witnesses as misleading and irrelevant. the broadcast and entertainment industries to treat talents
While SONZA failed to cross-examine ABS-CBN’s like SONZA as independent contractors. SONZA argues
witnesses, he was never prevented from denying or that if such practice exists, it is void for violating the right
refuting the allegations in the affidavits. The Labor Arbiter of labor to security of tenure.
has the discretion whether to conduct a formal (trial-type) The right of labor
53
to security of tenure as guaranteed in
hearing after the submission of the position papers of the the Constitution arises only if there is an employer-
parties, thus: employee relationship
These verified position papers shall cover only those claims and
causes of action raised in the complaint excluding those that may 608 SUPREME COURT REPORTS ANNOTATED
have been amicably settled, and shall be accompanied by all Sonza vs. ABS-CBN Broadcasting Corporation
supporting documents including the affidavits of their respective
witnesses which shall take the place of the latter’s direct under labor laws. Not every performance of services for a
testimony. x x x fee creates an employer-employee relationship. To hold
Section 4. Determination of Necessity of Hearing.—Immediately that every person who renders services to another for a fee
after the submission of the parties of their position
is an employee—to give meaning to the security of tenure subject to the 10% value-added tax (“VAT”) on services they
clause—will lead to absurd results. render. Exempted from the VAT 57
are those under an
Individuals with special skills, expertise or talent enjoy employer-employee relationship. This different tax
the freedom to offer their services as independent treatment accorded to talents and broadcasters bolters our
contractors. The right to life and livelihood guarantees this conclusion that they are independent contractors, provided
freedom to contract as independent contractors. The right all the basic elements of a contractual relationship are
of labor to security of tenure cannot operate to deprive an present as in this case.
individual, possessed with special skills, expertise and
talent, of his right to contract as an independent Nature of SONZA’s Claims
contractor. An individual like an artist or talent has a right SONZA seeks the recovery of allegedly unpaid talent fees,
to render his services without any one controlling the 13th month pay, separation pay, service incentive leave,
means and methods by which he performs his art or craft. signing bonus, travel allowance, and amounts due under
This Court will not interpret the right of labor to security of the Employee Stock Option Plan. We agree with the
tenure to compel artists and talents to render their services findings of the Labor Arbiter and the Court of Appeals that
only as employees. If radio and television program hosts SONZA’s claims are all based on the May 1994 Agreement
can render their services only as employees, the station and stock option plan, and not on the Labor Code. Clearly,
owners and managers can dictate to the radio and the present case does not call for an application of the
television hosts what they say in their shows. This is not Labor Code provisions but an interpretation and
conducive to freedom of the press. implementation of the May 1994 Agreement. In effect,
SONZA’s cause of action is for breach of contract which is
Different Tax Treatment of Talents and Broadcasters intrinsically a civil dispute cognizable by the regular
54 58
The National Internal Revenue
55
Code (“NIRC”) in relation courts.
to Republic Act No. 7716, as amended by Republic Act No. WHEREFORE, we DENY the petition. The assailed
Decision of the Court of Appeals dated 26 March 1999 in
_______________ CA-G.R. SP No. 49190 is AFFIRMED. Costs against
petitioner.
54 Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also SO ORDERED.
provides the following:
Davide, Jr. (C.J., Chairman), Panganiban, Ynares-
SECTION 1. Scope.—Pursuant to the provisions of Sections 244 and 108 of the
Santiago, and Azcuna, JJ., concur.
National Internal Revenue Code of 1997, in relation to Section 17 of Republic Act
No. 7716, as amended by Section 11 of Republic Act 8241, these Regulations are
_______________
hereby promulgated to govern the imposition of value-added tax on sale of services
by persons engaged in the practice of profession or calling and professional 56 Act amending Republic Act No. 7716, otherwise known as the
services rendered by general professional partnerships; services rendered by actors, Expanded Value-Added Tax Law and other pertinent provisions of the
actresses, talents, singers and emcees, radio and television broadcasters and National Internal Revenue Code, as amended (December 20, 1996).
choreographers; musical, radio, movie, television and stage directors; and 57 Section 109 of the NIRC provides:
professional athletes.
SECTION 2. Coverage.—Beginning January 1, 2000, general professional Exempt transactions.—The following shall be exempt from the value-added tax:
partnerships, professionals and persons described above shall be governed by the xxx
provisions of Revenue Regulation No. 7-95, as amended, otherwise known as the (o) Services rendered by individuals pursuant to an employer-employee
55 Otherwise known as the Expanded Value-Added Tax Law. 58 Singapore Airlines Ltd. v. Hon. Cruz, 207 Phil. 585; 122 SCRA 671
(1983).
609
610
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